It bites

Last year at this time 32 houses a day were selling in Victoria, that quirky little citystate where everyone thinks they’re special. So May sales hit just over a thousand – which is the last time that’ll happen for years to come. This year? At the half-way mark, the pace of deals has collapsed 35%. Meanwhile active listings have shot ahead 17%, since the writing is now on the wall.

The price of oil has been snaking higher for some time and crossed the important $70 mark last week as the Trumpster trashed the Iran deal. Some people say eighty bucks is coming. Maybe ninety. So you’d think the truck nuts would be swinging in Cowtown as confidence builds and houses find buyers.

But, nope. Sales so far this month have taken a 27% tumble from last year (which wasn’t great). Listings are swelling like an aroused stallion and have jumped 34% in Calgary. Meanwhile the average house has fallen another 6.5% in value.

In Toronto, where the real estate board no longer publishes mid-month stats (part of its campaign to be obtuse, impenetrable and peckish), it seems last month’s decline has accelerated. In April average prices were 14% lower, sales dropped 32% and detached deals were down 34%. In Vancouver there hasn’t been a single day this year when property sales have passed the 200 mark – which used to be a common occurrence.

Those house pumpers, scared realtors and mortgage floggers who came here months ago to say the B20 stress test was toothless are now licking their wounds. Combined with the relentless inching ahead of mortgage rates (thanks to central bankers and the bond market), the entire Canadian real estate scene is changing rapidly. Hot markets, like the GTA and YVR, are cooling. Money seems to be flowing into those other places – Ottawa and Montreal, for example – where house prices are still at manageable multiples of local income.

“Mortgage qualification is done by using the higher of the benchmark rate or 2% above your contract rate. Your contract rate being the rate your payments are based on. For example, with a 5 year variable rate at 2.21% (prime -1.24%), you would have to qualify as if your payments were at the rate of 5.34%. 2% above 2.21% is only 4.21%, so the qualifying rate would be 5.34%, since that is the higher of the two.

With a 5 year fixed rate at 3.49%, 2.00% above this rate would be 5.49%. As this is higher than the 5.34% benchmark rate, your qualification would be based on 5.49%.

This is what is referred to as the Stress Test. You need to qualify based on a higher rate, which is to protect you against rising rates. In other words, it ensures that you will still be able to afford to make your mortgage payments if rates were to rise higher. As we are now in a rising rate environment, this not a bad idea actually, and is a pretty decent example of forward thinking. It’s just frustrating when you are shopping for a home and the maximum amount you qualify for continues to decrease.

A year ago, the qualifying rate was 4.64% and you could still qualify for 5 year fixed mortgages based on your contract rate… providing you had at least 20% down payment. (this changed January 1st, 2018).

To give you an idea of how much impact this has, a couple with a $120,000 household income would have qualified for a mortgage as high as $800,000 a year ago. Today, that same couple would only qualify for around $600,000. That’s a 25% drop!”

Exactly right. Months before B20 landed, this blog told you eventually it would erase as much as 20% of available credit for first-time buyers. That’s now happening. We also warned the major credit unions would be forced into adopting the stress test, along with the banks. Also taking place. And inevitably sales volumes and prices would shudder. Ditto.

What we didn’t know last autumn was that the US Fed would raise its key rate four times in 2018 (now a certainty) nor that the Bank of Canada would jack three times (a 95% probability, according to the markets). And how could anyone have surmised that Comrade Premier Horgan would enact legislation designed to purposefully tax the BC market into oblivion?

So here we are. The economy’s decent, but not torrid. Wages have gone up, but job creation has stalled. NAFTA’s looks iffy, but oil is plumping. Corporate profits are robust, but the Canadian market isn’t. Families crave more debt, yet everyone believes houses always goes up. It is a land of disconnects.

Contrary to what you might think, Financing Real Estate Is not the only industry in this country. Rates are rising (normalizing) because there’s a lot more money to be made (and a lot less risk) lending money to corporations and governments, compared to residential mortgage lending.

But now that a generation of borrowers are hooked into their million-dollar mortgages and six-figure HELOCs like so many fish in a gill net, the banks see a steady stream of ‘easy money’ for the next two decades, as debtors’ pride and keeps them making those mortgage payments.

Nope, there’s no incentive for the banks to change anything, and indeed, the bank’s shareholders will vote to keep things that way.

> “Last year at this time 32 houses a day were selling in Victoria, that quirky little citystate where everyone thinks they’re special. So May sales hit just over a thousand – which is the last time that’ll happen for years to come. This year? At the half-way mark, the pace of deals has collapsed 35%. Meanwhile active listings have shot ahead 17%, since the writing is now on the wall.”

Are those DOM stats inclusive of cancelations, terminations, and relistings?

Do broker Paul thinks that a housing market supported by mortgages that are 700% of gross income is sustainable sound public policy? Can you imagine having a gross income of $120k and trying to service an $800K mortgage and actually getting sleep? Are you gta dwellers actually sane?

The stress test is probably a good idea because it means people have to buy houses that they might be able to afford over the long term. In years past that cap was provided by limits CMHC placed on the amount you can borrow but of course those eventually went away. Or banks would only lend at a certain multiple of income, also long gone.

Just because a bank will lend you $800,000 on $100,000 a year of income doesn’t mean that you can afford to borrow it. That’s 8 times income! Grandma always said 3-4! She probably never saw rates this low in her lifetime but we may never see them again either. It’s very difficult to make predictions, especially about the future.

In April, 25% of homes in Victoria sold over asking. If that is a slow or declining market, then I think most sellers and homeowners will be happy.

In South Vancouver Island, which means communities north of Victoria, quality houses are still selling in a day for over ask. They are selling above 2017 prices and above the inflated 2018 assessments. If the houses are not quality, they may take weeks or months, but they are still selling – and selling 30-50% above their price 2 years ago.

At a time when the B20 pre-approvals were all expired, April saw a resurgence of the market. This was odd as things were cool for months. Sales of good properties continue to be brisk in May.

The outflow of capital from ‘cashed out’ Lower Mainlanders, primarily boomers, continues to swallow any decent property. Prices here, just like in Vancouver, have become detached from local incomes as the affordability crisis spreads to more corners of the province.

Inventory continues to be limited, hence the decline in sales.

Many are hoping for a deluge of listings to soften prices, but as its May, and none is forthcoming, that ship has sailed for another year. Retirees and ‘cashed out Vancouverites’ who just moved here are not planning on on going anywhere else regardless of price action. Those waiting, will be waiting a long time for that much hoped for supply…

“B20 Bust” @ #16 sounds very much like a realtor. I assume so, given the quotation of stats/numbers.

I think it would be great if people honestly prefaced their comments with their relationship to the real estate industry. Would lend more credibility to what they’re saying – and also announce their biases. There are very few realtors who speak practically, providing information rather than propaganda.

”But now that a generation of borrowers are hooked into their million-dollar mortgages and six-figure HELOCs like so many fish in a gill net, the banks see a steady stream of ‘easy money’ for the next two decades, as debtors’ pride and keeps them making those mortgage payments.”
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T R A P P E D – Unable to sell because they can’t afford to write the big cheque to the bank for the difference between what the house is now worth and the mortgage they have on it. Can’t walk away since the banks will sue them for the difference between what house sells for and the mortgage when house value drops below the mortgage value. What a hell of a situation to be in. I can see a recession looming in the not too distant future then watch prices drop. It is different this time, it is much much worse.

I realise this is is Victoria-specific and not ‘South Island’, but it’s pretty common for real estate trends to spread from region to region – hottest to the next hottest, and so on. Vancouver to Victoria. Victoria to South Island communities. And so on.

You dirty vermin lying SHYSTERS are horrible people who lie for money and ruining lives. Most SHYSTERS are not qualified to fill most minimum wage jobs since many lack even a high school diploma. Since the market crashed last year dirty lying SHYSTERS have made incorrect claims again and again. I really don’t know how to fully Express my dislike for these lying sacks of poop. There are honest realtors but they are outnumbered by useless SHYSTERS.

No surprise there. The oil and gas industry, which didn’t even have that much of a presence in Calgary during the boom, isn’t going to start to invest in big projects until they see oil prices in the $100/barrel range *and* a long-term solution to the transportation problems resolved. Even then, front-end engineering for a major oilsands project takes a couple years, and the engineering component pales in comparison employment-wise to the masses of people employed in supporting sectors. Much of the Calgary boom experienced in the 2000s was just a plain old fashioned RE bubble which peaked in 2011, a little bit earlier than the rest of the country.

“Inventory continues to be limited, hence the decline in sales. “

Inventory is not limited, however, people looking to sell are in disbelief when they are shown comps for properties similar to theirs that have transacted only at prices that they ‘believe’ were prices of many years ago. Too many people unfortunately extrapolated numbers they saw in the newspapers about ‘house price increases’ in the post-2013 era, to their own situations. Leading to a delusion of wealth that really didn’t exist, and equity on a potential sale that is unfortunately a lot slimmer than previously anticipated.

The banks know this vulnerability, and hence are adopting increasingly predatory policy. The TSX is actually starting to move in the right direction right now, and appears to be in the process of breaking out.

What about our Loonies? Will we have an 80+ sent loonie or will Poloz support Toronto yuppies, femicommies & anarchists to mortgage their lives for plywood in a feminist city (Toronto, maybe even MTL); leading us to a 50 cent LOONIE?

Ha, love the Vic bashing. Sadly, for those waiting for a flop however, it ain’t going to happen. Watch wait and see.

If you think for a second that one govt propped up by one nutbar Greenie is going to have any lasting impact on real estate in Victoria (or BC for that matter) you’re smoking BC bud, bud.

The damned lies of stats prove nothing and can be endlessly twisted any way you want, as Garth says the RE boards constantly do, ahem.

Victoria is Canada’s Monterrey, its Oahu, its Palm Springs with ocean and space. It’s by many accounts the only decent place to live in this arctic nation.

And it is on an island…in the Pacific ocean…where they’re not making any more land…and where well over 45% of people in this country say they plan to retire to…and real estate is about to tumble?

Sorry – Victoria was officially discovered about eight years ago, and is just getting started. You can’t overdevelop a place that everyone wants to be. Call it boring, for newly weds and nearly deads, laugh it off as Comrade Whoreagain’s domain at your peril.

It is the wealthy and the rich coming here, and they’re not about to stop because of stress tests and rate hikes.

“You’ll see…” is what I’d like to say, but won’t because unless you’re there, you won’t.

In Victoria I am seeing many homes in my neighborhood sitting over a month with no sale where the previous 2 years they would sell in a weekend. Bidding wars are becoming history and price cuts increasing. Inventory is shooting up week over week in numbers we haven’t seen in a long time. The speculation tax hasn’t even started here as well. Come fall I think the panic will start to set in. Most people here are still not aware how bad things really are here now. Realtors in this town are doing anything they can to try and make the numbers look good

OK… but it’s still correct to say DOM became 2.2 times greater than a year earlier. That’s the way to present the statistic if one wished to make maximum hay out of it. As an added benefit, it makes more sense and nobody stumbles over erroneous interpretations of percent.

… results from Facebook’s app audit are in. After examining “thousands” of apps to see if any had misused personal data, the social network has found 200 nefarious applications and suspended them. Names of the offending apps have not yet been released.

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Tin hats opening and closing
Robert Jeffress,/Hagee
Pastor Who Said Jews Are Going to Hell Led Prayer at Jerusalem Embassy Opening

This time I’m not joking. Ironic that it’s the 10 year anniversary of this blog. I say anything over $2M is going down by 50% at least. The NDP couldn’t have come up with a better tax if they tried. About the only and first thing they have right since the ferry debacle. They have even out Jacinda’d New Zealand with this one. Those idiots in Kits that think they are entitled to $5M+ homes because they bought with no real financial planning and no retirement planning, can cry us a river. Real estate has been a casino for the past 15 years and it’s time odds changed. And for those that can’t believe it, I’m also a home owner (with cash in the bank like many of you renters ready to swoop on some more when it goes down).

Money seems to be flowing into those other places – Ottawa and Montreal, for example – where house prices are still at manageable multiples of local income.
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This reflects how wrongminded we have become. Ordinary people should not be buying real estate in other places just because it is cheap (and, by the way, it isn’t even cheap anywhere in Canada). On the consumer level, that might be appropriate for cans of tuna fish, and on investor level, it makes sense for stocks. But houses are neither tuna fish nor stocks.

Last year at this time 32 houses a day were selling in Victoria, that quirky little citystate where everyone thinks they’re special. So May sales hit just over a thousand – which is the last time that’ll happen for years to come.

ETF.com: You recently said you see the worst stock market correction of your lifetime coming next year. What’s going to cause that?
Jim Rogers: I can give you lots of possibilities. These things always start small and with nobody noticing.
For instance, in 2007, Iceland went bankrupt when most people didn’t know there was an Iceland, much less that it could go bankrupt. And then the next thing you knew, Bear Stearns collapsed; and then Lehman Brothers collapsed. Finally, everybody said, “Oh, there’s a problem.”
That happened slowly over a year. That’s probably what’s going to happen this time. It may have already started. There are companies going bankrupt in China. The whole banking system in Latvia collapsed recently.
Who knows what will cause it? I don’t. Rising interest rates, trade wars, real wars— many things could cause it. But it will be gradual. The worst collapse in my lifetime doesn’t happen in a day. It will evolve over a year or two.
ETF.com: Why do you think the next downturn will be so extreme?
Rogers: Historically, we’ve always had economic setbacks and bear markets. In 2008, we had a problem because of too much debt worldwide. Since then, the amount of debt has skyrocketed everywhere in the world. Why would people think the next collapse—whenever it comes—won’t be worse than the last one?
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Affordable housing is already a hot button political issue. Housing advocates have long pointed out the lack of affordable options in big cities with booming tech sectors, like San Francisco, but where does that leave the rest of the country? We wanted to find out, so we created a new map that illustrates how much an average worker would need to earn to afford a typical two-bedroom apartment in each state.

We found the data for our map through the National Low Income Housing Coalition (NLIHC), an organization focused on creating public policies that help poor Americans afford decent homes. The organization analyzed the combination of an average worker’s wage and the cost of housing to determine which states have the worst housing problems, keeping in mind that people should not spend more than 30% of their income on housing. We developed an intuitive, color-coded map highlighting how much money you need to earn to afford a two-bedroom home, revealing the places with the biggest problems in housing affordability.

The first and most obvious conclusion from our map is that every single state requires more than the federal minimum wage to afford a typical two-bedroom. Even at the very bottom of the spectrum, in Puerto Rico, you would need to make $9.68 per hour. At the opposite end, someone in Hawaii would need to bring home an incredible $35.20. The vast majority of states fall somewhere in the middle of these two extremes, typically between $14 to $18 per hour. The federal minimum wage is $7.25 per hour, which means that even if you have a working spouse, DINC workers (dual income, no children) making minimum wage still cannot afford a two-bedroom in most of the country.

Another interesting takeaway from the map has to do with geography. There’s a clear cluster of pink and red (more expensive) states in the Northeast, stretching as far south as Virginia. This indicates that workers need to make around 3 times the federal minimum wage to cover their rent. Bear in mind that not every low-wage worker makes the federal minimum; in fact, many states and cities set their own, higher, wage floors. In New York City, for example, the minimum wage is progressively rising every year until it tops out at $15 by 2021. Even by this measure, employees working in these low-paying jobs will still fall hopelessly short of earning a sustainable, livable wage—you need to make $28.08/hr today to afford a two-bedroom in the state of New York (it should go without saying that the state average is certainly much lower than that of housing in the City), let alone what you will need to earn three years from now.

Top 10 States with the Highest Hourly Wage Needed to Rent a 2 Bedroom Home
1. Hawaii: $35.20 per hour

2. Washington, DC: $33.58 per hour

3. California: $30.92 per hour

4. Maryland: $28.27 per hour

5. New York: $28.08 per hour

6. Massachusetts: $27.39 per hour

7. New Jersey: $27.31 per hour

8. Connecticut: $24.72 per hour

9. Alaska: $24.16 per hour

10. Washington: $23.64 per hour

The current debate surrounding affordable housing clearly focuses too much on big cities with housing shortages. These places are experiencing rapid growth from booming technology sectors, and they don’t represent the broad experiences most Americans face every day. Politicians would be wise to pay a lot more attention to how the working poor struggle to make ends meet everywhere in the country.”

God bless your spittle flecked invective flung at the cringing, panicking masses of under employed, soon to be financially broken, real estate agents….its a refreshing change from the politically correct pablum foisted upon
a catatonic, weary, overworked, overtaxed downtrodden private sector serfs by the media and the govt. day after day after day

Sitting here in Victoria right now praying that this land of double rainbows and unicorns takes a kick in the n*ts – I own but it’s ridiculous in this town – can’t wait for reality to be served and everyone will be Shock and Awe

Hulk Horgan rules. He is allowing Eby to do his thing. I would not bet again Eby. He is just getting started.

Other things are headwinds.

The money laundering is “it” in BC.

No big money source to pay those big money Vancouver properties, no movement. Just fools trading sideways or taking on dangerous debt.

Watch how fast this liquidity drop kills off the BC market. In progress

Not only was this the biggest driver in prices – it will be proven to be the biggest driver in losses (losses that are currently happening big in Vancouver)

Biggest BC demographic cannot afford homes. Liberals ain’t ever coming back, because if they do, everyone knows they will ease policy on the money laundering, which we all know is the big money source.

Back in my little area of Vancouver West ,7909 Laburnum
Street just sold for $2,580,000. Big Corner lot over
10,000 sq ft, with a little TLC a nice property. The reason I mention this, when the market was hot a year or so ago
they asked $3.5 mil and have had a number of price reductions
Also sold last week Assessed Value $3.9 Mil, just got $3,080,000. Address 1877 West 63rd Ave. Keith, you seem to have a handle on the area, please confirm. Also
my Neighbour in April 2016, recd close to a 800K
over asking. My have things changed!

For years we were told the economy was doing horrible because oil was in the ditch, yet housing was on an absolute tear and people were making tons of money.

At the same time we were told inflation was “low” when everyone’s rent went up 10-15% per year

Prediction: oil will rise further as speculators will bet on higher Mid East tensions. They may be right in the short term since It all depends on Hamas and Hezbollah. Iran will look to get these two to instigate Israel as much as possible to deflect, and paint the Trump administration poorly. Any attempts will be dealt with swiftly this time by Israel since they won’t be held back by Washington.

The US, Russia with Israel (and Arab allies) will then forge a better Iran agreement, bringing much better prospects for peace, and making oil fall again. The US continues to boom under Trump.

By that time, T2 should be voted out and business confidence will return to Canada. Rates will head higher marginally but not significantly, and reach a low ceiling point. The immediate impact of OSFI regulations will have faded too by then. GTA RE resumes it’s climb.

Canadians live under rocks.
The rocks represent their brains.
After the financial crisis the governments dropped interest rates to keep people from jumping off buildings like they did in the Great Depression.
The real estate bonanza brought fake jobs and fake wealth and helped keep suicide rates low. Now that the worst is over the governments are supposed to be responsible and balance budgets. That won’t happen in this country as government is addicted to debt and we kick the can down the road.
It will be 20 years before SFH real estate recovers from this historic bubble. As speculators are forced to sell prices will continue to fall. Governments will continue to be irresponsible as citizens demand every outrageous service under the sun and idiotic voters feel entitled.
You cannot borrow your way to prosperity.
Our governments are starving for tax revenue. As they hit you up for more cash there will be less money to invest here to create good jobs. Without good jobs you cannot afford exponentially higher real estate prices.
Government economists are acutely aware of this. This will not stop them from raiding every dollar they can extract from the artificial asset bubble they knowingly created.
You need to hire politicians more like Hazel McCallion and less like Wynne, but you won’t.
Prepare for long term decline. Pay your mortgage and forget about having children.

> This reflects how wrongminded we have become. Ordinary people should not be buying real estate in other places just because it is cheap (and, by the way, it isn’t even cheap anywhere in Canada). On the consumer level, that might be appropriate for cans of tuna fish, and on investor level, it makes sense for stocks. But houses are neither tuna fish nor stocks.

You cannot live off the back of a can of tuna.

Rentiers want to live off the back of working families, appropriating some of their income. Who cares if in later life one of the adults cannot afford medical care, or cannot repair an aging car which is no longer roadworthy?

The “respectable” landlords have to go on holiday and “invest” in real-estate. That’s right, they are not mugging poor people. They are “entrepreneurs”!

So the stress test is going to reduce prices, right? Seems we all agree on this.

So available credit sets prices.

So why don’t we do what they did before and set mortgage max lending at 3.5 times *primary* income?

The goverbankment moving to 4 times *household* income instantly forced all working families to have two incomes, because available credit sets prices. If you don’t have two incomes you will be outbid by someone who has two incomes.

We should also disincentivise landlords. There are far too many Canadians who own more than one home.

It’s a total mess. Nobody can be bothered to read up on most of this stuff.

Long time reader and agree with much of your investing advice, but I respectfully disagree with your thoughts on the BC premier. Finally we have a politician looking out for the citizens.

I have been in this country for nearly half century and I knowe we have lost our way. Globalism, unfair trade agreements, political correctness, liberalism, giving our country away little by little. A downward spiral this is – the future is going to be a mess. Bound happen -Canadians asleep at wheel for many decades.

I like Trump – he stands up for USA – not like sellout Trudeau and globalist Harper. Peopke who come from communist country have seen this darkness and know this is true.

The land of milk and honey is starting to slowdown.Three to seven days to sell a house in Victoria.I thought bidding wars were here forever.The wealthy are still moving to Victoria in droves and happy and smiling faces everywhere.The stress tests are meaning less in this real estate market.

“We should also disincentivise landlords. There are far too many Canadians who own more than one home.”

Isn’t an implied return a mere fraction of the stock market for taking more risk disincentive enough?

I haven’t run through the math lately on the comments here, but last time I did, Canadian RE was like buying a stock with a P/E of 40, and a long-term growth rate in “earnings” (ie: net rents) roughly the rate of inflation. The stock market values companies like that with P/E ratios of 10 or less these days, making rental RE’s valuation as an asset class extremely absurd.

Its a little bit better of a situation for owner-occupied RE because there’s no income tax on imputed rents, but there’s no deductibility of mortgage interests costs either as would be the case on rental RE.

#77 K…..agree…..went to Victoria recently and it’s a complete flop house delusion of stanky unwashed mouldy….and very creepy because literally the first word that comes out of people’s mouths is…”Are you buying?.

When I responded with the negative and spoke why I saw a major price correction in the iffing I was met with outright hostility…..how dare I? No facts or statistical babble could rewire these unicorns.

Anyway…..like I care. Is anyone holding FTT?……Holy Hockey Pucks…the numbers they put up on the conference call prove out why the stock has doubled recently. Shoulda bought more…..wahhhhh. The shares I’ve held for five years are a stick pickers wet dream…..dividend and all.

#55 ” Liberals ain’t ever coming back, because if they do, everyone knows they will ease policy on the money laundering, which we all know is the big money source.”

Funny you say that; I will likely vote NDP first time in 25 years, next time round, even though I gag writing that. This despite their photo radar and tax me to death approach, they honestly cost me $$$. But at least they’re doing SOMETHING on housing that acknowledges foreign capital’s OBVIOUS role. unlike Complicit Cristy Clark.

I don’t get how you can write this *and* find your way back home when you go out somewhere.

How are prices set? By credit. Are rates rising? Yes.
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I use GPS.

Rates are rising at glacier speed.

In US credit is available as well, and interest is tax deductible, and you can lock interest rate for 30 years; incomes are higher and cost of living lower. Yet houses are way cheaper. So there must be some other factors in Canada. Yes?

They just slashed nearly 200k off and are down to Pink Draw territory.

Peter Parker should have used his spidey senses and realized that you can’t reliably buy a detached in Vancouver and put it back on the market the following year ,and collect 20 percent more as the web of deceit has become clogged with less buyers able to squeeze through the gaps.

I pity those moving to Victoria who haven’t been here for years and buying blind. The place is littered with crackheads OD’ing all over the place. Last week one guy bit the dust in the middle of the road in prime downtown area right in front of me. Guy driving beside me almost ran over him. Sad but the new reality.

Crime is up all over too. Plus most new gouge price condos are built in the heart of crack alley. It isn’t the pretty post cards anymore.

ETF.com: You recently said you see the worst stock market correction of your lifetime coming next year. What’s going to cause that?
Jim Rogers: I can give you lots of possibilities. These things always start small and with nobody noticing.
For instance, in 2007, Iceland went bankrupt when most people didn’t know there was an Iceland, much less that it could go bankrupt. And then the next thing you knew, Bear Stearns collapsed; and then Lehman Brothers collapsed. Finally, everybody said, “Oh, there’s a problem.”
That happened slowly over a year. That’s probably what’s going to happen this time. It may have already started. There are companies going bankrupt in China. The whole banking system in Latvia collapsed recently.
Who knows what will cause it? I don’t. Rising interest rates, trade wars, real wars— many things could cause it. But it will be gradual. The worst collapse in my lifetime doesn’t happen in a day. It will evolve over a year or two.
ETF.com: Why do you think the next downturn will be so extreme?
Rogers: Historically, we’ve always had economic setbacks and bear markets. In 2008, we had a problem because of too much debt worldwide. Since then, the amount of debt has skyrocketed everywhere in the world. Why would people think the next collapse—whenever it comes—won’t be worse than the last one?
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TCC

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How contrarian! You truly are this generation’s great undiscovered investing mind.

AI Artificial Intelligence is replaying a huge number of jobs in the next 10 years (5 000 000 truckers in NA as an example) and yet we take on monster amounts of debt. I don’t even want to own our Gold Plated banks let alone an $800 000 mortgage. This does not even address a huge tax revenue shortfall from AI and electric vehicle. Just jack the tax up on homeowners. The best of times, the worst of times……

Folks, there will be no massive housing collapse in the Toronto. The 905 has had a hit but to have US 2007 style housing collapses you have to have large sub divisions sitting empty with no buyers. Scan the GTA folks and you won’t see an empty home in a new sub division much less the whole sub division. Like it or not GTA bashers, the folks keep coming here from around the world. We are the 3rd largest metropolis in North American behind only New York and Los Angeles. If a 50% haircut came to Toronto real estate you can kiss the rest of Canada good bye as well…

Nobody is seriously suggesting a collapse. But buying at peak house can cause years of financial misery for people who depend on hope and leverage. Pumpers like you benefit nobody (but realtors like you). – Garth

OK… but it’s still correct to say DOM became 2.2 times greater than a year earlier. That’s the way to present the statistic if one wished to make maximum hay out of it. As an added benefit, it makes more sense and nobody stumbles over erroneous interpretations of percent.

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It takes an open mind and a certain amount of confidence to reevaluate and admit to a mistake. Even Buffett does that occasionally (IBM most lately).

The latest polls show Ford in the lead but say Horwrath would be the best leader. That’s odd how can someone behind in the polls be considered best leader?

I’m not suggesting Horwrath wins but stranger things have happened. I can see a minority gov’t forming between the NDP and Liberals. But I can’t rule out a Bob Rae repeat.

I am in no way an NDP supporter, I’ve never voted for the NDP and never will. I just foll what the numbers tell me and Horwrath is surging in the polls while one is flat (Ford) and Wynne is falling. If the trend is your friend this isn’t looking good.

I could be completely wrong but it’s something to take note off and prepare for. Higher taxes and more govt spending.

#103 Benz…..spot on…..Dippers Dopers and Crack Heads are a zombie army …..don’t dare leave anything in your car. Went downtown…crawling with crackheads….went to fancy dim sum place inside a hotel….rear parking was a camping ground for crack heads Dippers and Dopers
…..unbe freaking believable!!! So…..drove over to the nice side of town….Oak Bay…..more Dopers Dippers and crack heads on almost every corner….down the streets and lanes…..really noticeable…..and yes….I’m sure the home break ins are scary in number but discreetly not being reported by the advertiser dependant media. I went over for a few days ….I wouldn’t live there. The parts between Victoria and the only way out….the very expensive ferry……is a waste land of nothing. My advice…..stay the F away from Vancouver Island.

“Nobody is seriously suggesting a collapse. But buying at peak house can cause years of financial misery for people who depend on hope and leverage. Pumpers like you benefit nobody (but realtors like you).” – Garth

I agree with you Garth that buying at peak levels can cause years of misery. My point is that the ship has sailed for Toronto and there will not be a return to low house prices that existed perhaps a decade ago. For the record, I am not a realtor but the co-owner of a large private international high school in the GTA.

“#126 Mattl on 05.15.18 at 9:54 am
TD just released a 2.45 5 year variable.”

Sure, but how many actually qualify for it? The most creditworthy borrowers, they might not see much of an escalation of their costs. But its the ones further down the totem pole of credit qualify, trending towards subprime (ie: less than 20% equity, >80% LTV) who will pay increasingly large spreads. Many will receive an offer for a renewal at the “posted rate” (or worse), and find that such is their only realistic financing option.

Ross Kay had some comments along those lines in his most recent interview. Definitely check them out.

Bottom line, money is still incredibly cheap to borrow.

Not relative to what the underlying asset itself is doing (depreciating), or even relative to the minimal levels of inflation, and soon, deflation that are likely to exist. Money is rather expensive at the moment, especially people paying actual, not just teaser discount rates that are increasingly not applicable.

But that’s what I think the market has wrong. It’s not rising because of expected rate rises. It’s rising because the US is a fiscal disaster.

If the Fed stops raising and yields keep rising, that shows I’m right. We’ll know much more in the second half of the year, but that’s where I think we’re headed.
Why would yields on the 10 year be around 3% when they have a debt of soon to be 22t and a deficit of 2t? This makes absolutely no sense.

After tax, people buying those bonds are making negative real return. This makes no sense.

It also doesn’t make any sense that the 30 year yield is only 0.14% more than the 10 year. So someone is willing to take 20 years more inflation risk for 0.14%? Nonsensical.

The curve is clearly tilting towards inversion in the last six weeks, which means the bond market knows these rate rises are almost done. I’m not saying June won’t happen, but that is likely the last one if it happens.

The market now expects three more Fed increases in 2018. Don’t fight it. You will lose. – Garth

The real annual inflation rate in America is running at 8 to 9 percent not the .2 percent lie we just got on the CPI index the other day. Not to mention the last two jobs reports out of America were also total lies. The wage gains were in actuality higher and the jobs create both months were well over 300,000. The smart money or insiders know the real figures which was reflected in the U.S. dollar at the open today before they started frantically buying up bonds to prop up the stock market and attempt to push down the 10 year treasury yield.

Cdn banks on their variable rate race to the bottom to spur mortgage growth. Bullshit move because Cdn Banks already with their oligopolies have to keep finding ways to squeeze an already captive audience for profits. lord knows they can’t do anything else.

if the frigging government wants to do a real justice to the real estate market – force the CREA to open up the data, price discovery, times listed, price changes, let us know what we’re bidding on. ban the practice of pre-flips, friends and family discounts and platinum club membership real estate agents that can add somewhere between 20 and 40% to the price of the asset before it hits the general public. a rational investor would tell this play to f*ck right off, but for housing, we jump right in and hope something is there to catch us. and the millenials want a bail out because “but but but!”

forget interest rates. full disclosure. who you’re bidding against (so you’renot like that poor shmuck that overbid 400,000 against herself). then you’ll have a rational market.

This. If the deterioration in the housing market continues, people will blame the government, in the same way they blame the government when there is a recession. A does not involve B, but voters are not rational beings.

“I’m not suggesting Horwath wins but stranger things have happened. I can see a minority gov’t forming between the NDP and Liberals. But I can’t rule out a Bob Rae repeat.”

The Liberals have swung to the left from the center both federally and provincially and the NDP are even further out in left field. So if the Ontario Conservatives can’t get a majority your predictions of higher taxes and deficits are on the way…

No. NDP doing well marks a repeat of the federal election in 2011 where the centre imploded. It’s perfect.

This time around, unlike the federal one, we won’t need the NDP to do well in order to have a crushing Blues majority. I do think they will be official opposition though.

I was putting up PC signs in Etobicoke Centre all weekend and we are crushing it. It’s fantastic. Etobicoke will be pure blue top to bottom with Hogarth winning in the Lakeshore and Douggie winning in the North.

90+ seats at least. Hopefully 100+!

UltraBlues 2018!

And falling house prices to crush The Snowboarder and Tax Fairness in 2019! Although that will be more of a challenge since Jagmeet refuses to denounce Sikh terrorism, and is not polling well in QC. We need the NDP to do well in 2019 so we win again. Big problem at this point that needs a solution.

case in point. not a single cdn bank involved in any of this. that’s what lack of competition does. thats why we pay so much for so little – be it taxes, subsidies, overpriced cellular/cable/phone plans, premiums for unthrottled internet, etc etc. there’s a few families that are making out like bandits and for those smart enough to see through the charade of free and open markets.

Gotta love the BC voters. 10 years from now, all these new taxes will still be there – no mater if houses are worth half or double of what they are today. These same taxes will likely triple in size and scope by then. 10 years from now, just about every middle class BC’er will also be paying these new wealth style taxes alongside the rich.

The revenues from said taxes are going into the Provincial coffers never to be heard from again. About a year from now, the Provincial Government will be totally, utterly, and irrevocably dependent on the revenue stream created by these new taxes – and they will never – EVER go away.

BC voters look to be developing a death wish. Stupid high housing and rent with crummy wages, RE economy, Citizens vote for huge taxes on anyone not living in a cardboard box. Everyone is angry and looking for revenge (via government – bad plan). If it keeps up, no normal working human will want to suffer the financial humiliation of trying to live there.

No matter what kind of problems exist in a Democratic Society, – if said problems have been around a while, and persist – you can blame the Citizenry for most of them.

The year was 1994. The economy was finally showing strong growth after emerging from a miserable recession. Unemployment was hovering around 10% but slowly dropping. Inflation was non-existent – less than 1%. Government deficits were massive, and governments could ill-afford higher rates.

So what did the BoC do? Drastically raised rates. Why? Investor confidence in Canada was faltering due to said deficits and the referendum campaign in Quebec starting to heat up. So rates nearly doubled from mid-1994 to late 1995, and the economy stayed in the $hitter for another two years. The nascent recovery was extinguished. 4.5% growth in 1994 turned into almost zero growth in 1995 and 1996. Unemployment stayed above 9% for another 3 years.

The lesson from that? Sometimes rates go up even when every sector of the economy – including the government of the day – desperately needs the opposite. Don’t expect any mercy for indebted homeowners and consumers. They’re on their own.

Average after-tax income of two-or-more-person households in 2015 in Richmond, BC was/is $81.000
81/12= $6750 per moth
20%DP=$200K – How these families save that much?
Debt = $800K with MP @ 2.25 5y VMR = $3,489.00
Everything else: $3,260.00 for minimum of 3 ppl 2 parents and 1 kid
Richmond Land lot value for SF dwelling = 1M, I see SOLD signs on SF houses since 2015 till now.
Question:
How would it be possible to make any move up purchase that is evidently happening as I see all the SOLD signs based on all the assumptions repeated here on this blog? Equity cannot be of any boost as price for the move up purchase is up as well.
Perhaps there is some “financial cartwheel gymnastics” maneuver that allow people to buy and sell here in Richmond city! There is no SF house in Richmond under 1M and sold signs are on the 1.5M – 3.5M…..How this is possible?

TD just released a 2.45 5 year variable. So much for expensive money. The Banks are so dependant on mortage lending they are giving up bps spread to win business.

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Are you suggesting that banks have to compete for business? How will all those who view the big 5 as an oligopoly with little to no price competition react to this news?

Or maybe it proves Blacksheep’s wrong-headed view that banks have zero cost of funds as they print loans from thin air (if I understand his view correctly).

#128 Smoking Man on 05.15.18 at 10:04 am
Wow MSM finally talking about the housing crash.
The culprit. Stress test…
If you haven’t unload , its to late, ride it out. Just going to get worce.
Just think next year, Justin will get pegged for this…
Wynee no longer appearing in adds, haha…I love it when a plan comes together…
She won’t even win her seat…..fair housing plan did her in.
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Not that your incorrect with respect to Housing and Wynn but for crying out loud learn some basic grammar and use a spell checker you idiot, I surmise you have a smart phone? So let it be smart for you since your not!

The real estate agent I used to find my current rental e-mailed me and asked if I was interested in looking to buy a home.

I briefly considered trying to vulch in somewhere in south rexdale, downsview, the westway area where homes are being listed in the 700-800ish range, but I doubt these folks would want to negotiate down to a more reasonable 500k range just yet.

I suspect the area is due for a revival due to it still being relatively cheap but still in the city and the go and UP transit options.

#126 Mattl on 05.15.18 at 9:54 am
TD just released a 2.45 5 year variable. So much for expensive money. The Banks are so dependant on mortage lending they are giving up bps spread to win business.

Bottom line, money is still incredibly cheap to borrow.
————————————————————–
Still have to qualify at 5.34%. Which makes the payment 36% higher! That takes a bite out of the amount of financing you can get

Not Wynn on 05.15.18 at 11:31 am
#128 Smoking Man on 05.15.18 at 10:04 am
Wow MSM finally talking about the housing crash.
The culprit. Stress test…
If you haven’t unload , its to late, ride it out. Just going to get worce.
Just think next year, Justin will get pegged for this…
Wynee no longer appearing in adds, haha…I love it when a plan comes together…
She won’t even win her seat…..fair housing plan did her in.
………………………………………………………….
Not that your incorrect with respect to Housing and Wynn but for crying out loud learn some basic grammar and use a spell checker you idiot, I surmise you have a smart phone? So let it be smart for you since your not!.

#128 Smoking Man on 05.15.18 at 10:04 am
“… If you haven’t unload[ed], it[‘]s to[o] late, ride it out. Just going to get wor[s]e. [Etc., etc.]

#145 Not Wynn on 05.15.18 at 11:31 am
“Not that you[‘]r[e] incorrect with respect to Housing and Wynn but for crying out loud learn some basic grammar and use a spell-checker, you idiot. I surmise you have a smart phone? So let it be smart for you since you[‘]r[e] not!”

Pot calling the kettle black? OMG, did I just defend Smokey? Yikes! :)

Maybe you should practise what you preach…
………………………………………………………….
Point taken gentlemen. My own smartphone has put me into the cross-hairs of two astute philosophers.
I do believe that “practise” is spelled practice here. IHCTD9 Practice vs. Practise. The difference between these two mainly comes down to British vs. American spelling. In British English, practise is a verb and practice is a noun. In American English, practice is both the noun and verb form.
In regards to an Smoky he wouldn’t even have picked up on the error. His brand has a low bar.

The Liberals have swung to the left from the center both federally and provincially and the NDP are even further out in left field. So if the Ontario Conservatives can’t get a majority your predictions of higher taxes and deficits are on the way…
______________________________

The Cons are slowly creeping over to leftyville as well. That’s why my vote strategy has changed. The voting majority in Ontario DOES NOT CARE about money, debt, deficits, or the economy. They care about SJW issues, climate change bunk, they are afraid others may be better off than them, they want free stuff, cheap houses in downtown Toronto, an end to fossil fuels, and big minimum wages.

Plus, Ontarians are DUMB. When Wynne announced she was going to borrow Billions to lower hydro bills temporarily, while freely admitting we’d have to pay it all back in 5 years plus the interest on top, – her popularity went UP.

If I took out a loan from the bank to give myself a pay raise – I guess most Ontarians would congratulate me on my newfound prosperity.

Whoever gets to run this province next will have to either tax the crap out of us, or scoop deeply into the gravy bowl.

“as they print loans from thin air (if I understand his view correctly).”
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Shawn buddy…do you have old-timers disease. Are you a bot? OR…are you a bot, with software written to ACT, like someone with old-timers disease?

It hasn’t been 2 weeks since you personally confirmed my stance and advanced knowledge on this topic:

“Shawn # 173, on 05.03.18”

“Blacksheep is correct that a bank does not FIRST need to attract a deposit to make a loan. Instead deposits and loans mostly get created at the same time.”
———————————————-
Yet today you endevor to falsely paraphrase my words?

Cdn banks on their variable rate race to the bottom to spur mortgage growth. Bullshit move because Cdn Banks already with their oligopolies have to keep finding ways to squeeze an already captive audience for profits. lord knows they can’t do anything else.

***********************************
At the risk of riling up the bank haters, it seems a bit odd to point to banks in a race to charge the lowest interest rates as a squeeze for profits.

On its face this looks like competition pushing prices down.

Of course one can always interpret the data differently and say that they are going to get more volume to make up the lower interest rate charges. Or you can view them as tricksters trapping people into a teaser variable rate that will inevitably move higher.

But on its plain face this is competition working as it should. Let us rejoice in that.

P.S. there are 32 fully licenses Schedule I banks in Canada and scores of other lenders. And you can go to a broker who will shop your loan for the best deal.

“Blacksheep is correct that a bank does not FIRST need to attract a deposit to make a loan. Instead deposits and loans mostly get created at the same time.”

********************************************
Thank you Blacksheep this is an important topic.

Now as I also said once the deposit and loan are simultaneously created as the first step, there are more steps.

Next the customer who took out the loan spends the deposit and the lending bank has to attract a new deposit to replace that. It typically faces a cost for that which is why you receive interest on GICs and many bank deposits.

What I claimed above is that your view is that banks have no cost to fund loans. I obviously meant not only in the instant of creation before the loan is even accessed and spent but over the life of the loan.

Is it your view that banks have no cost to funds loans over their life and therefore charge interest without facing any cost of funding?

And just are the implications of your observation that banks can create a deposit and a loan simultaneously out of thin air. (Though as I Have said there are some limits on that such as as regulations on bank equity to loans.)

Garth has said I think that what is most precious of all is time and how we use it.

Garth clearly must have great time management skills and discipline to run and moderate this blog, his large financial enterprise, restore historic buildings, ride the bike, walk the dog and keep Dorothy happy and all the other essential tasks of life.

#75 georgist on 05.14.18 at 9:48 pm
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You cannot live off the back of a can of tuna.
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Nor can you live off the backs of a recently purchased rental property. Not in Canada today. There are no cash-flow-positive residential properties on the market in Canada now. In YVR this has been true for a decade but in other places, the change has been more recent. Rentiers are making either flat-out negative returns or returns that are negative compared to investments in conventional financial instruments. They are fools, not scum.

As Garth might say try moving out of your comfort zone and living a little. Life is short. In the meantime check out Golden Visa program. Your ticket to the world!http://www.goldenvisas.com/tag/canada-residency/
See how it works for Canada and then check out other countries. You can get ‘real deals’ when the property markets are down.
Check out southern Europe, Cyprus etc…

I have a friend who is a very well known and successful agent in YVR . The other morning I asked her what she was up to for the day , casual conversation. She replied “ I’m going out to knock on doors , it’s time to do some cold calls “ I was shocked , she always has multiple listings on the go . Not these days . The dark clouds are on the horizon.

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The views expressed are those of the author, Garth Turner, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.